The Reading Room

Employer 'reference pricing' set to impact imaging

Shaun Lillard, Imaging Performance Partnership

Is your imaging program competitively priced within your market? Yesterday’s Daily Briefing highlights a recent New York Times article that discusses why your organization may need to change its scan prices in the near future. Around 15% of large employers plan to experiment with “reference pricing” next year as they search for lower-cost ways to provide health benefits to employees.

What is “reference pricing”?

Reference pricing is a strategy employers are testing that enables them to set a fixed amount they will pay for a given procedure. Generally, the employer sets this cap based on what is regarded as an average price for the service in that market.  If patients choose a physician or hospital that charges more than that amount, they must cover the additional amount themselves.

In what is being seen as a model for implementing reference pricing, the California Public Employees’ Retirement System (Calpers) has worked with the insurer Anthem Blue Cross, a unit of WellPoint, to substantially reduce health care operations costs since 2010. James C. Robinson, a health economist at the University of California, Berkeley, estimates $5.5 million in savings for the first two years of the program.

Calpers has shown it has the clout to force providers to cooperate by bringing down prices, but there is no reason to believe large employers could not successfully apply the same strategy in markets where they employ a large share of the workforce.

Do you have experience with reference pricing in your market? Contact me to tell your story.

What is the likely effect on imaging providers?

The article also cites the case of the Kroger Company, a large grocery chain, who worked with Wellpoint to cap certain MRI and CT scans around $800. Kroger’s benefits team determined there was little or no impact on quality when limiting the locations where the company would cover the full cost, and employees still maintained a range of choices.

While employers are attempting to average prices for a number of procedures, ranging from back MRIs to hip replacements, imaging is likely to be impacted first

Nonurgent tests performed in an outpatient setting offer a greater opportunity for price shopping by patients than inpatient procedures, which tend to be more variable in input costs. In addition, the benefits experts designing reference pricing plans claim that quality differences are much smaller for outpatient scans than for inpatient or ED procedures.

Whether or not they are correct, we recommend your program make an honest assessment of its chargemaster and determine whether prices are in line with those of competitors in your market. 

Reaching out to large employers in your region and gauging their interest in reference pricing schemes might help assure that your organization isn’t left off the list of affordable providers if those employers do begin implementing such payment models.

More on Pricing Trends

Interested in learning more about pricing trends in imaging? Take a look at our 2013 Outlook for Imaging Pricing, which covers the current state of imaging pricing, how to determine when price adjustments may be necessary, and how stakeholders are using new tools to steer patients to lower-cost facilities.

We will be discussing imaging pricing in further detail this fall at our national meeting, On the Brink of Accountability. Register now.

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